The CHRO, the extended enterprise and the freelancer

If most experts are right, the digitization of or work and work relationships, the on demand economy, uberization… will radically transform the paradigm of work. We’re going towards an economy of freelancers where independent contractors will slowly replace a more or less large part of employees.

The matter is not to discuss whether people decide to become freelancers or are forced to, if it’s a chosen way of life or a status downgrade (in fact both exist, exists who want to take control over their work/life and employees losing control over everything) but of the impact of such a switch.

Subcontracting has always been a production matter, not an HR one

The concept of freelancing has absolutely nothing new and and many businesses and industries it used to be used long before the so called digital revolution. It was called subcontracting.

But there’s something fundamentally new today.

• Subcontracting was a B2B concept. A business made a deal with another one that provided resources.

• It was mainly about production and execution tasks.

• It could be used to adjust the production capacity in case of a demand peak.

• Subcontractors when off hidden from the client.

And now :

•freelancing is a “Business to individual” thing. Businesses don’t deal with businesses but with individuals.

• It can be about execution but also expertise, design, advisory, management, project management…

• In some cases all the operations are given to freelancers.

• The freelancer can be in front of the client. Sometimes that’s even the purpose, because of the business model

Freelancers are not subemployees

Subcontracting has long been more about production than HR because no one cared about the status of the subcontracting worker. No matter he had not the same benefits as the “normal” employee he was replacing or complementing. He was a resource, not a person. Businesses were buying a production capacity, nothing more.

A model that won’t stay long in the era of mass freelancing.

First for volume reasons. When the employee/subcontractor ration is 90/10, subcontracting is an exception to the model and a business can decide to not pay attention to this workforce. When the ratio becomes 10/90 the power relations change.

Similary, when you as an external expert to design and run a major project you can’t consider him as a negligible resource.

When your customers only meet the freelancers you put on the field your customers experience does not rely on employee experience but on contractors experience. If the relationship worsens between uber and its drivers, for example, or if uber invests less on training and tools and the model will collapse.

When you rely on a brilliant freelancer to help you to your digital roadmap, you can’t afford treating them as subemployees while the weight on their shoulders is huge. And you can’t even less if they work among your staff, hands in the dirt while the others are clueless and expect them to save their business

So freelancing becomes as much of a HR matter than a production and operations one.

HR must rethink their strategies for the extended enterprise

For all these reasons it’s logical to discuss the role of HR in this new ecosystem and wonder if it shoud expand beyond the walls of the company to deal with all the individuals contractors that make the business run.

It could be a matter of social responsibility (a field where most businesses compete on promising more than their competitor), of ethics and, let’s be honest, a business driven one. Doing nothing may have a devastating impact on the mid-term.

An obvious but not that easy approach to implement. Businesses want to both control their customer experience (what means maximal integration of the contractors) and cut their coasts. This is exactly what happened to Homejoy : caring to much of the contractor may lead courts to qualify contractors as employees with all the consequences we can imagine.

In the current context caring to much about freelancers can be legally dangerous. But not caring will be dangerous in the long-term.

When a business relies on freelancing, the contractor brand replaces the employer brand.